This course aims to describe the process of price formation of a financial asset starting from the analysis of the empirical regularities (often called as "stylized facts") observed in the time series of several financial assets recorded in markets of primary interest. The course starts with the discussion of efficient market hypothesis, presents stylized facts observed for primarily financial indicators and discuss market microstructure aspects. After a discussion about market data nature and sources the course consider stylized facts and case studies regarding individual and institutional investors, automated trading and the role of exogenous and endogenous news. The course ends with a short introduction to agent based models in finance.

The course presents how to obtain, analyze and interpret financial data recorded both daily and at high-frequency. Along with the introduction of the concepts underlying the detection and interpretation of stylized facts, the course also presents algorithms that students can actively use to perform empirical analyses.

The learning outcomes of the course.

By successfully completing the course the students will be able to:

- Understand the concept of efficient market hypothesis and its relation with empirical stylized facts;

- Analyze and model several stylized facts of price formation in a financial market;

Different set of data. High-frequency data. Tick by tick data. Metadata. Data containing the coded identity of investors. Electronic data about news. Data from social networks or from the web. Tools of analysis, data mining and data visualization.

7. Market microstructure

Order book in a double auction market. Limit orders and market orders. Adverse selection. Market impact and optimal execution.

(1) Assessments of type 1 (30 % of the final grade). Starting from lecture 3 the students will get home workconsisting of empirical analyses, which they will have to submit electronically.

(2) Assessment type 2 (30% of the final grade). The midterm assignment will be after lecture 6, consisting of a test or of a small project on empirical and theoretical aspects presented in the course.

(3) Assessment type 3 (40% of the final grade). In this final project students will have to perform a research project including some of the following activities: (i) constructing a model, (ii) running simulations, (iii) performing empirical analyses and (iv) critically analyzing results. They will have to prepare a written report and a presentation.